Instead of 4.1 percent growth in the second quarter, the Federal Reserve Bank of Atlanta’s widely followed GDPNow model now calls for a 3.7 percent rate. And the New York Fed reduced its rival Nowcasting estimate slightly to 2.1 percent. In March, that forecast stood at 3 percent.
Despite the slight erosion in expectations recently, the job market has remained strong, pushing the unemployment rate down to 4.4 percent last month. As a result, the Federal Reserve Board is expected to raise interest rates twice more this year, with traders are betting that the next increase will come in June.
In other words, the so-called new normal — steady but not spectacular growth that never reaches escape velocity — is beginning to resemble the old normal.
“We’re still on track for a 2 percent growth economy, give or take a little, but not a 3 percent economy,” said Diane Swonk, a veteran independent economist in Chicago. “It may not sound like much, but the difference is important.”
In a $17 trillion economy, it is a difference of $170 billion per year, which has major implications for corporate profits, worker pay and even the federal government’s bottom line.
The budget proposal released this week by the Trump administration assumes growth of about 3 percent annually, and President Trump has talked about annual growth of 4 percent or even more.
Neither figure is realistic, given the country’s aging population, and low growth in productivity, Ms. Swonk said.
“Those two factors make for headwinds that are hard to overcome,” she said. Although the kind of annual gains that Mr. Trump has targeted were achieved in the mid-2000s and the late 1990s, the economy’s underlying potential is not as strong now than it was then.
“It’s like trying to use old road maps in a GPS world,” Ms. Swonk said. “We need to acknowledge that.”
Scott Anderson, chief economist at Bank of the West in San Francisco, has not had to lower his expectations for the current quarter. That is because he has been considerably less optimistic than many of his peers, with a forecast of roughly 3 percent.
“I’ve been below consensus for a while,” Mr. Anderson said, citing the likelihood of weaker spending by businesses. “There’s not a lot of visible growth drivers outside of consumer spending and rebuilding inventories.”
“Everyone is hanging their hat on stronger consumer spending, but there’s a lot of uncertainty there,” he added, noting that data expected next week on personal income and spending would be an important indicator of how consumption is shaping up.
Besides tempering expectations for the broader economy, traders appear to be discounting the likelihood of major tax cuts or a burst of infrastructure spending this year, judging by a recent drop in bond yields.
Yields on the benchmark 10-year Treasury bond, which move inversely to price, were 2.25 percent on Friday, down from 2.6 percent in March. Investors tend to buy bonds when economic activity and the risk of inflation ease, and pare back as growth quickens.
The inquiries into possible dealings with the Russian government by associates of Mr. Trump, and conflicts among Republicans in Congress, may further stymie any big stimulus from Washington.
“We haven’t built any stimulus into our projections for 2017, and the way I’m seeing things, possibly not in 2018 either,” said Carl Tannenbaum, chief economist for Northern Trust in Chicago. “The dissonance in the Republican caucus is such that it will be hard for them to reach consensus.”
Given at least a modest uptick this quarter after the year’s weak start, Mr. Tannenbaum is looking for growth in the first half of 2017 to average about 2 percent.
While lower than many experts and consumers would like, that is still slightly higher than the growth rate in Germany, the largest economy in the eurozone.
Growth of around 2 percent is also what economists like Mike Gapen at Barclays expect for all of this year and next.
Typically, quarterly data is volatile, but in recent years, first-quarter growth estimates have been especially unpredictable. This year, as was true in 2014 and 2011, growth appears to have been very weak in the first quarter. Experts expect a rebound in subsequent quarters in 2017, as happened in those previous years.
Early this year, output was also reduced slightly by warm temperatures in many parts of the United States, slowing demand for energy from utilities.
One key indicator for the current quarter will come on Thursday, when the latest monthly data for auto sales is released. Slightly lower car sales reduced growth by about 0.4 percentage points in the first quarter, Mr. Gapen said.
On an annual basis, demand for cars has been running just over 17 million. If the number sinks below that threshold, expectations may have to be adjusted downward again for the second quarter, which ends on June 30.
On the other hand, Mr. Gapen noted that Asia, Europe and other markets are finally growing in sync with the United States, rather than there being rotating global weak spots.
“We don’t have a problem child,” he said. “In previous years, it was the fiscal cliff in the U.S., or debt fears in Europe or a hard landing in China. Global growth is more synchronized, without any individual pillars showing weakness.”